The Tesla Model Y unveiling by CEO Elon Musk failed to wow Wall Street, with Tesla tumbling in Friday’s stock market. But setting aside the Model Y and all the drama surrounding the luxury electric vehicle maker, Tesla stock has been a poor performer for quite some time.
Tesla Stock Technical Analysis
Tesla stock fell 5% to 275.43 on Friday, its lowest close since Oct. 22 and continuing a three-month slide. The relative strength line, which tracks a stock’s performance vs. the S&P 500, also is in a three-month slide. It’s been in a downtrend since mid-2017. The RS line, the blue line in the chart below, is close to a two-year low. (For more explanation of the RS line, please watch the above video.)
Tesla Stock Breakouts Failed
The latest Tesla stock slide came after a failed early December breakout from a 366.85 cup-with-handle buy point. No shame there, with the stock market correction going into overdrive. But Tesla stock is now significantly below where it was on Dec. 24, when the correction ended. Meanwhile, the current stock market rally has powered higher.
Back on Aug. 7, Tesla stock cleared a short consolidation, when it spiked 17% to just hit an all-time high of 387.46 after Elon Musk made his infamous “go private” and “funding secured” tweets. Shares fell back the next day, tumbling to 247.77 two months later.
A September 2017 breakout also abruptly failed.
In fact, since a massive 386% run from a March 2013 breakout to its September 2013 peak, Tesla stock has only had one successful breakout that hasn’t failed within a few days or weeks.
From the November 2016 to June 2017, Tesla stock shot up 118% to 386.99. The actual breakout came in April 2017 from a cup base at 287.49, resulting in a solid 35% rally. Tesla stock did give back more than half of those gains in the next two weeks.
The RS line is below where it was after Tesla’s historic March-September 2013 run. So if investors sold their Tesla stock at that September peak and invested in the S&P 500, they’d be better off today.
Tesla Earnings Outlook Uncertain
Tesla bulls can point to recent Tesla earnings as a sign that fundamentals are improving. In the third quarter, the automaker delivered surprise adjusted earnings of $2.90 a share, followed by $1.93 in Q4. But much of those Tesla earnings came from a sharp drop in capital spending last year.
Tesla has cut prices three times in 2019 even as Model 3 production shifts to lower-priced models. That suggests weaker demand and lower margins. Tesla last month also announced a third round of layoffs in the past year, declaring it would close virtually all its stores, then partially reversing a few days later.
Finally, Elon Musk also warned last month Tesla will likely have a Q1 loss.
All that has taken a toll on Tesla stock.
The analyst consensus is still for strong full-year Tesla earnings with robust EPS growth in 2020, though estimates vary wildly. Investors also aren’t sure.
Tesla Model Y
Elon Musk touted the Tesla Model Y as a crossover SUV, a hot vehicle segment today. It will share parts and a platform with the Model 3, a common cost-saving industry practice. But to most observers, the Model Y looks like the Model 3 sedan, and not a crossover SUV. In any case, the Tesla Model Y won’t be mass production until several other automakers have luxury electric crossovers on the road.
Also, gearing up for the Model Y presumably will require increased capital spending, pinching profits and cash in the next two years.
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